We recommend a buy in the stock of Greaves Cotton from a short-term perspective. It is apparent form the charts of the stock that it changed direction after taking support at Rs 60 in July 2012, triggered by positive divergence in the weekly relative strength index. Since then, the stock has been on a medium-term uptrend.
Early this month, the stock took support at around Rs 73 and continued its uptrend. On Friday, the stock jumped 4.4 per cent accompanied by extraordinary volume, breaching its moving average compression (21, 50 and 200-day moving averages). The daily relative strength index is likely to enter the bullish zone from the neutral region and weekly RSI is moving higher in the neutral region.
The daily moving average convergence divergence indicator has signalled a buy. Both daily as well as weekly price rate of change indicators are hovering in the positive terrain implying buying interest. The stock's medium-term up trendline is intact. We are bullish on the stock from a short-term horizon.
We expect its rally to prolong and reach our price target of Rs 82 or Rs 83.5 in the approaching trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 77.